Retailers’ suit targets Chinese textile

Dozens of big US retailers, including J.C. Penney Co. and Liz Claiborne Inc., have filed suit to stop the Bush administration from moving forward on requests from US textile industries to impose new limits on Chinese garment imports.

The suit, filed Dec. 1 at the US Court of International Trade, highlights the squeeze the administration faces in having to chose between big US importers and a beleaguered domestic industry. The outcome of the fight could be all the more potent because it involves China, whose booming exports to the US is one of the main causes of the US’s ballooning trade deficit with the rest of the world.

The US Association of Importers of Textiles and Apparel, the main trade group representing major US garment importers and retailers, hopes to win an injunction to block the Commerce Department and four other US agencies from considering nine petitions from domestic textile companies seeking strict limits on clothing and textiles coming in next year from China.

The dispute will attract attention around the world as it comes just weeks before the Dec. 31 end of an international system that has controlled access to the US apparel market for decades. For the first time, nearly all countries will be allowed to ship any quantities they choose to the US without the restraint of quota limitations. A new quota on China would dramatically curtail imports from the Asian giant while giving a leg up to big garment makers in Latin America, Southeast Asia, and other regions.

Under the current timetable, the Bush administration has until early February to decide whether to impose the new limits on China. Any step in that direction would likely stir anger in Beijing, where officials have argued that China is being unfairly targeted to satisfy protectionist pressures in the US.

Domestic US textile companies won the right to request temporary relief from Chinese textile imports through 2008 as part of China’s entry into the World Trade Organization three years ago. But the retailers and importers are arguing in their lawsuit that the Bush administration bent the rules by agreeing to consider new quotas based merely on the threat of a surge in imports from China starting next year.

“The government is accepting petitions that don’t even meet its own limited standards. The government’s behavior is outrageous,” said Laura Jones, director of the importers trade group, known as USA-ITA.

The group also argues that the inter-agency organization charged with handling garment quotas, called the Committee for the Implementation for Textile Agreements, operates in secret, without due process or orderly input from companies whose business is directly affected by its decisions. The committee consists of representatives from the departments of Commerce, Treasury, State and Labor, along with the US Trade Representative’s Office. All five agencies were named in the lawsuit.

Domestic textile companies are seeking limits on huge categories of goods ranging from cotton pants to knit shirts and underwear, all of which still fall under the global quota system. Very few of these goods are still made in the US.

Because of the global restraints, China remains a bit player in much of the US apparel market, far behind much smaller countries like Guatemala and the Dominican Republic. China, for instance, supplied less than three percent of the $8.65 billion of cotton pants the US had imported this year through September. In several categories in which US companies seek protection, including cotton and wool pants, imports from China have shrunk this year.

The rules of China’s entry into the WTO allow the US to limit import growth in garments to 7.5% over the previous year in any given category. If nothing else, the US importers hope an injunction will at least delay any new quotas long enough for China to ratchet up its shipments to the US early next year, so that fresh limits would be imposed on top of much higher volumes.

Retailers now fear that an import cap could cut off all Chinese shipments